![Problem 15-8 Price Dilution [LO3] Nemesis, Inc., has 215,000 shares of stock outstanding. Each share is worth $81, so the com](http://img.homeworklib.com/images/34d0698c-d162-46e4-8da5-181cbadeeee0.png?x-oss-process=image/resize,w_560)
Homework Answers
Answer:
Workings:
a.
Theoretical Ex-Rights Price = (Market Value of shares prior to rights issue + Cash raised from rights issue) / Number of shares after rights issue
= (84 * 215000 + 84 * 48000) / (215000 + 48000)
= $84
b. Theoretical Ex-Rights Price = (84 * 215000 + 75 * 48000) / (215000 + 48000) = $82.36
Effect (amount) on existing price per share = 84 - 82.36 = $1.64
c. Theoretical Ex-Rights Price = (84 * 215000 + 69 * 48000) / (215000 + 48000) = $81.26
Effect (amount) on existing price per share = 84 - 81.26 = $2.74
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